MHC class I molecules are the major receptors for viral peptides and serve as targets for specific cytotoxic T lymphocytes. HIV-1 infection of T cell lines decreases cell surface expression of class I and decreases the promoter activity by up to 12-fold. Repression is mediated by the HIV-1 Tat protein, derived from a spliced viral transcript, identifying a novel activity for this two-exon Tat, distinct from the transactivation of the HIV LTR common to both one- and two-exon Tat. The target of Tat-mediated repression maps to the basal promoter. However, Tat does not bind DNA directly, nor does it target either the TATAA or Inr basal promoter elements. Rather, its activity is directed to the transcription iniation complex. Using yeast-two hybrid screening, we have identified a transcription factor that interacts with Tat and may be the target for repression. Studies are in progress to further characterization this interaction, and its role in repression. Mapping of functional domains of Tat protein demonstrates that repression and activation are mediated by distinct and separable domains. Tat repressor activity depends on C-terminal sequences, whereas transactivation depends on N-terminal sequence; both functions require core sequences. The repressor activity requires a domain encompassing the region encoded by the second exon of the Tat gene, beginning at amino acid 73, with a C-terminal limit between amino acids 80 and 83. Tat repressor function also depends on the presence of a lysine at position 41, located within the core of the protein. Tat repressor activity is completely independent of two N-terminal domains essential for transactivation, the acidic segment and the cystein rich region. Conversely, Tat transactivation is independent of the second exon encoded region of Tat. As further support for this novel model of separable Tat functions, we have shown that in murine fibroblasts, Tat represses class I promoter activity, but does not transactivate the HIV LTR. We propose that distinct structural domains mediate Tat's two functionally distinct activities.